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Ethanol Saving Travelers Millions this Holiday Weekend

Gas is higher than last year but not near as high as it would be without ethanol.

May 27, 2011

While gas prices are nearly 40% higher today than they were one year ago, the AAA auto club anticipates 31 million Americans will head for the highways this Memorial Day weekend. A survey of traveler intentions suggests the average distance traveled will be 792 miles. Thanks to ethanol , they'll spend quite a bit less on gasoline that would otherwise be the case. In fact, the Renewable Fuels Association says the average American family traveling this weekend will save more than $31 simply because ethanol is holding gasoline prices down. Aggregate gasoline savings due to ethanol this Memorial Day, based on AAA estimates of average trip length, will be $440 million.

These numbers were reached through a recent Center for Agricultural and Rural Development study by economists at Iowa State University and the University of Wisconsin, which found that the increase in ethanol use kept wholesale gasoline prices down 89 cents per gallon from what they would have been in 2010. So assuming that each gallon of gasoline purchased would cost 89 cents more per gallon, that the average trip will be 792 miles in length, and that the average fuel economy rate is 22.5 miles per gallon; the average traveling party would purchase 35.2 gallons of gasoline for the trip. That gives you a savings of around $31, actually just a little bit more.

The study further concluded that from 2000-2010 the growth in ethanol production reduced wholesale gasoline prices by 25 cents per gallon on average. Accordingly, increased blending of ethanol resulted in American drivers saving an average of some $34 billion annually during the last decade.

The aggregated savings assumes the average traveling party is 2.2 people. If 31 million people are traveling, that means there are some 14 million traveling parties, and each is saving a little more than $31 on gasoline purchases as a result of ethanol. That brings total savings to around $440 million.